The Power of Compound Effect:
The story of “rice and chessboard” is a famous example illustrating the power of compound interest and how it can create incredible growth over time:
A king wanted to reward a mathematician for his contributions. Instead of asking for an expensive gift, the mathematician made a very simple request: on a chessboard, he wanted the king to place one grain of rice on the first square, two grains of rice on the second square, four grains on the third square, eight grains on the fourth square, and so on, with each subsequent square having double the number of grains of the previous one.
The king thought this was a very small and easy request to fulfill. However, after calculating, he realized that the total number of grains of rice required for all 64 squares of the chessboard was an astronomical number. Specifically, the total number of grains is:
- The first square has 1 grain of rice.
- The second square has 2 grains of rice.
- The third square has 4 grains of rice.
- And so on, with each subsequent square having double the grains of the previous one.
The formula for the total number of grains on 64 squares would be:
1 + 2 + 4 + 8 +…+ 2^63
The total number of grains is 2^64 – 1, which is an enormous number. In fact, this total exceeds the entire global rice production.
This story clearly illustrates the power of compound interest, where the value of an investment or amount can grow rapidly and exponentially if given enough time and a sufficient interest rate.